Republic of Armenia : Accumulation, Competition, and Connectivity

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Abstract

By 2013, the Armenian economy has left
behind most of the hangover from the global financial crisis
and a look at medium-to long-term growth drivers is
therefore in order. Real Gross Domestic Product (GDP) growth
reached 7.2 percent in 2012, and the current account deficit
narrowed, although it remained high. Macroeconomic buffers
have been rebuilt to some extent, although the public
debt-to-GDP ratio, at 44 percent, remains too high to relax
fiscal restraints. The central tenet of this report is that
the government's job creation agenda requires a
different growth model than the one followed before the
global crisis. Reaching the goals of the government's
strategy will require a combination of four factors: 1)
higher investment and better financial intermediation
between savers and investors; 2) better utilization of the
labor force, including the largely untapped resource of
Armenians abroad; 3) stronger competitive pressures in the
markets for goods and services, which will improve
incentives for companies to innovate, adopt new
technologies, and become more efficient; and 4) enhanced
connections of the landlocked Armenian economy with world
markets, including through land, air, and through internet
and communication technologies. This report's
theoretical framework emphasizes structural reforms to drive
growth. Economic growth theory distinguishes between
accumulation of the factors of production and enhancing the
productivity with which these factors are employed.